Brexit – a Status Report

After a year of negotiations over the UK’s withdrawal from the EU, there is still much uncertainty over what the EU-UK relationship will look like after formal separation in March 2019. When Prime Minister Theresa May first took office in July 2016 shortly after the Brexit referendum, she said she would seek a close relationship with the EU, but would pull the UK out of the European customs union and ensure the country would no longer be subject to rulings from the EU Court of Justice.

At the time of writing this, achieving these goals is proving to be a complex matter, and there are growing indications that UK participation in the EU customs union and acceptance of EU Court of Justice will not cease completely by B-day, i.e. the date in when the UK ceases to be a EU member. Over the past year, the UK has accepted that a transition period will be necessary for a new relationship with the EU to take effect. This in effect pushes back the UK’s full withdrawal from many of the main elements of EU membership to after December 2020.

 

Brexit – key dates so far

23 June 2016 – referendum on EU membership ends with 51.9% of votes in favour of leaving

13 July 2016 – Theresa May becomes new prime minister

29 March 2017 – UK officially launches the two-year Brexit process to leave the EU

8 June 2017 – Theresa May loses her parliamentary majority in a snap election, and is forced to form a minority government with the support of a small ultra-conservative party from Northern Ireland

26 June 2017 – start of formal negotiations with the EU

15 December 2017 – phase 1 of the negotiations is completed, dealing with the terms of separations (including EU citizen’s rights and the Irish border), and phase 2 begins, dealing with the future relationship between the EU and UK

19 March 2018 – major progress in negotiations, including agreement on a transition period up to 31 December 2020 during which the UK will remain under EU rules pending entry into force of the yet-to-be-agreed EU-UK arrangements

The forces at play

Immediately after the referendum results, pro-Brexit politicians in the UK said they could use a tactic of divide and conquer to undermine the EU. This has never materialised. The EU has proven to be remarkably united and steadfast in defending its negotiating position. Any hope that British euro-skeptics might have had of buying out individual countries has failed, at least so far.

On the other hand, some strong divisions are apparent in the British camp, both within the ruling Conservative party and in the opposition Labour party. Among the conservatives, a group of about 60 members of parliament support a “hard Brexit”, i.e. a complete separation with Europe, and the immediate launch by the UK of trade negotiations with major countries around the world. The rest of the party’s parliamentary membership supports a variety of positions ranging from some kind of “soft Brexit” (i.e. an exit with the continuation of close ties with Europe) to continuation of UK membership. A minority of Conservative members is pro-European. In the Labour camp, the left-wing faction headed by party leader Jeremy Corbyn support a break from Europe, so as to regain the freedom to nationalise and subsidies national industries, but favour a continuation of the customs union with Europe. Many more moderate Labour MPs oppose Brexit.

Britain’s third party, the Liberal Democrats, is strongly pro-European. All in all, a majority of MPs opposes Brexit.

Such divisions in the British camp increase the appearance of EU unity – something that EU negotiators like to stress when they taunt their UK counterparts to come up with a clear, long-term vision of the future UK relationship with Europe. The fact is, the UK gives the impression is still not clear what relationship it wants with continent.

The EU customs union and the Irish question

The border between the Republic of Ireland and the UK province of Northern Ireland has emerged as a major element in the Brexit process. The issues goes back to the Good Friday Agreement of 1998, when Northern Irish Unionists and Republicans agreed to end the sectarian violence there through a deal that included the elimination of the border between the two Irelands. This elimination was made possible by the fact that both the UK and Ireland were part of the EU’s customs union, which eliminated the need for border controls. A British departure from the customs union would require a reinstatement of that border, with the risk of breaking the peace in Northern Ireland.

To avert this, on 15 December 2017 the EU and the UK committed themselves to ensuring that the Brexit deal would include a solution to avoid any new border. This commitment is likely to prove a crucial aspect in the remaining months of negotiation. Theresa May has proposed a system that would allow the UK to maintain “regulatory alignment” with the EU customs union by collecting import duties for the EU at the UK border, along with a number of technical solutions to replace the need for a physical border. The Conservative party’s “hard Brexit” faction supports an alternative solution, where instead of alignment, the hard border would be avoided by a system of advanced technological solutions to monitor traffic and replace border paperwork. Given the technical complexity of such never-tried-before solutions, it is unlikely either solution will be ready for practical deployment by the end of the transition period, and might not start operating before 2022 or later.

In mid-May, the UK media reported that the government had approved a plan to avoid a hard border in Ireland, though no details of this plan have yet emerged. It is likely to involve a version of the “regulatory alignment” already supported by the government. At the same time, hard-line Conservative brexit supporters have started expressing unease at how the government is handling the negotiations, and rumours have surfaced that they might challenge Theresa May in September.

What will Brexit look like?

In light of the above, it is clear that both the UK and the EU have some work to do before a clear picture emerges of the UK’s future relationship with Europe emerges.

Uncertainty reigns in several domains, in particular trade. So far, the two sides appear to be playing for time. The transition period will allow further talks to continue even after the official “Brexit day” of 29 March 2019. The Irish border question might postpone a deadline to the solution even further. But the outlook has changed since 2016. Back in the first weeks after the Brexit referendum, the UK painted a picture of complete British departure from the EU customs union, which would have meant that the UK would have to negotiate a trade deal with the EU similar to that agreed between Europe and Canada.

Today, the tone is different. The UK government is talking of ways of avoiding a hard border, suggesting that in the end, its relations with Europe might end up being more of a mixed system, combining elements of a Canada-style trade agreement with much closer arrangements in some specific areas.

Outside of trade, the UK is likely to gain complete autonomy in its agriculture policy, with the government replacing the EU in managing the current system of agricultural subsidies. In fisheries, the situation is more complex, as reflected in the current negotiations on the topic. The UK will regain formal control on legislation on product quality and safety standards, though in practice its companies are likely to end up implementing most EU rules if they want to sell their products in Europe.

The UK has already outlined plans to forge a deal with the EU to continue its involvement in the Horizon programme for Research and Innovation, thereby continuing to pay into that part of the EU budget. On specific issues, such as the Galileo satellite positioning system, the EU has indicated that the UK will not longer be allowed to participate due to security issues. But this could change if the two sides reach a suitable arrangement. On energy and climate policy, the UK is likely to pursue an independent policy. For the future of the climate negotiations, the UK is likely to work in close coordination with the EU.

To summarise, current trends suggest that in trade, the UK might end up with a deal where it will closely match the EU’s customs union,

Key dates from now:

  • 28-29 June 2018 – EU summit, where the EU leaders are to endorse the Brexit timetable agreed by negotiators in March
  • Mid-October 2018 – scheduled completion of Brexit negotiations
  • 18-19 October 2018 – EU summit, where the leaders are to approve the Brexit Treaty, thereby launching the process of ratification by all countries involved, including by the EU itself
  • 29 March 2019 – the UK will cease to be a full EU member state, but will remain under most EU laws until 31 December 2020, and will remain in the EU customs union until a suitable technical solution can be found to ensure that the border between Northern Ireland and the Republic of Ireland remains open
  • 31 December 2020 – end of the transition period and start of the new EU-UK relationship

Giacomo Valentini,
25 May 2018

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